The pound vs dollar rate slipped to 1.38 on Thursday as investors considered the outlook for an economic recovery from the pandemic in the UK. Earlier this week, the pair hit a six-week high after Britain’s unemployment rate unexpectedly fell for the second month in a row during the December to February period, most of which the country spent under strict lockdown restrictions.
UK retail sales exceeded expectations in March, surging to levels higher than before the Covid-19 pandemic struck, despite most shops being shut under national lockdown. The volume of goods sold in shops and online increased by 5.4% last month from February – double the gain of the previous month. Economists had forecast 1.5% growth.
The figures released by the Office for National Statistics this morning show pent-up strength for consumer demand during the last full month of lockdown. Large swathes of the high street began reopening on 12 April after the government made rapid progress rolling out its vaccination programme.
US jobless claims hit Covid-19 pandemic low
The dollar was pinned back on Thursday morning as fading gains in US Treasury yields reduced the dollar’s interest rate advantage. An upbeat report from the US Department of Labour, which showed unemployment claims hit a new Covid-19 pandemic low, couldn’t arrest the US currency’s slide lower.
Worker filings for jobless benefits dropped to 547,000 last week, providing further evidence of a strengthening labour market and overall economic recovery. Initial jobless claims fell 39,000 last week from 586,000 the previous week – their lowest levels since early 2020. Claims remain well above pre-pandemic levels – the weekly average in 2019 was about 218,000 compared to 651,000 currently – but last week’s drop extended a downward trend that began at the start of the year.
Economic activity in the US grew last month after falling in February as strong production, personal consumption, and housing data improved conditions. The Federal Reserve Bank of Chicago’s National Activity Index rose to 1.71 in March from -1.20 the previous month. This reading, which is the highest since July 2020, beat market forecasts of -0.66.
Today’s Markit manufacturing PMI and Markit services PMI for April – indicators of the economic situation in the UK manufacturing and services sectors – are both forecast to rise to 59 from 58.9 and 56.3 respectively.
An unusually quiet week in the US economic calendar concludes with a flurry of activity today, including the Markit manufacturing PMI, Markit services PMI, Markit PMI composite (all for April) and new home sales.